Monday, January 10, 2011

Building Mind Muscles(tm) for Market Profits

The markets are the markets. There is nothing most of us can do to change them. It is difficult to change the behaviors of people we know well, let alone the masses of people who affect the market daily.

But there is one thing we can change, and that is our financial decision process.

This series of blogs will look at new behaviors we can create that give us additional investing and trading choices that impact our risk and profitability. The foundation for these Mind Muscles is an earlier blog that can be read at:

Each blog will look at a new mind skill or Mind Muscle that will give you a new positive process.

Awareness Mind Muscle

Awareness is the foundation for improved market responses. Our brain has established neurological patterns that take the path of least resistance when we want to take an action. These patterns are well established, often created under stress to help us survive. Even these patterns represent behaviors that are not useful to us, we find it difficult to change. Some of these examples you may recognize...exercising more, eating better, following your trading system or stop procrastinating.

Awareness is the foundation for behavioral change because it allows us to slow down the habitual neural response and make a conscious decision and create new neural patterns that serve us better.

Awareness is like a muscle. It can be built and expanded and accessed in real time with practice. To get to this place of improved response in the financial markets, we need to build the Awareness Mind Muscle. Like going to the gym, this exercise is one way to build the awareness muscle.

Awareness Alarm Exercise

When you are doing your financial work, set an alarm for 20 or 30 minutes. You can do this on your smart phone, computer or with a kitchen timer. You are likely to forget about the alarm by the time it goes off. When it goes off, become aware of the following:

Your thoughts: What were you thinking about when the alarm went off? Were you lost in the flow of work? Were you telling yourself a story? Were you listening to a critical voice?

Your emotions: What feelings or emotional tone were you experiencing? Pressure? Stress? Joy? Sadness? Anger?

Your physical sensations: What sensations were present in your body? An easy way to do this is take a trip from your toes to your nose.

Now, take a spreadsheet, table or piece of paper and write down what you noticed. In the left column, put the date and time. In the next column, put your activity. In columns 3-5 put your thoughts, emotions and sensations. At first, this may seem foreign and challenging. But with repeated practice, this gets easier and better.

As you fill in this table, you may start to see patterns emerge of the kind of thoughts, feelings or physical sensations you have. For example, you may notice when watching an investment or trade that has lost money, you may have a tight stomach, have critical thoughts, or feel angry. This is a great awareness.

I cannot emphasize this too much - whatever you become aware of is OK. Right now, at this stage, the goal is just to become aware of your process, with self-acceptance. If you find yourself being judgmental, self-critical, or comparing yourself to the imagined states of other as you catch your internal process in action, note that also! It is all OK. We are just gathering data much as an anthropologist who would be delighted to note the behaviors of a newly found lost tribe.

As you do this exercise, your resolution and distinctions will get sharper about your internal process. Eventually, you will be able to monitor your thoughts, feelings and sensations in real time. In later blogs, we will talk about changing behaviors to get what you want. But for now, don’t worry about change. Just keep building that Awareness Mind Muscle.

Richard Friesen

Director of Trader Training
MarketPsych LLC
[email protected]

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